NBFCs Lead the Charge: Dipan Mehta’s Sectoral Outlook for 2026
Dipan Mehta, Director of Elixir Equities, is bullish on Non-Banking Financial Companies (NBFCs), citing a cleanup of books and strong potential for growth. His recent commentary suggests a selective approach to the Indian market, favoring specific sectors while advising caution in others.
The Rise of Diversified NBFCs
Mehta believes the NBFC segment has been strengthened by the resolution of issues in microfinance and MSME unsecured portfolios. He specifically recommends investors focus on diversified lenders – those involved in multiple product offerings beyond single areas like housing or gold loans. Bajaj Finance, Chola, and L&T Finance are highlighted as preferred names, with Mehta disclosing existing investments in these companies.
This preference for diversification reflects a broader trend in the financial sector, where resilience is increasingly tied to a varied revenue stream. NBFCs that can adapt to changing market conditions and offer a range of financial products are better positioned for sustained success.
Pharma’s Potential and the GLP-1 Opportunity
Alongside NBFCs, Mehta expresses optimism regarding the pharmaceutical sector. He acknowledges the potential of the GLP-1 market, despite increased competition, and suggests investors should be “overweight” pharma overall. Contract Development and Manufacturing Organizations (CDMOs) that have experienced recent corrections are flagged as potential turnaround candidates.
Solar Energy: A Long-Term Play
Despite current underperformance, Mehta remains positive on solar equipment manufacturers, viewing it as a sustainable compounding industry with long-term growth potential. He believes the recently imposed 126% customs duty will not significantly impact the sector, including companies like Waaree, and that current valuations are attractive. This suggests a belief in the long-term viability of India’s solar energy ambitions.
Cautionary Signals: Metals and Reliance Industries
Mehta advises caution in the metals sector, characterizing it as a cyclical industry that has already experienced a significant rally. While he would maintain existing positions, he is not advocating for new entries at current levels. Regarding Reliance Industries, he suggests the company is evolving into a holding company, a structural shift that may cause discomfort among investors awaiting IPOs for Jio and retail without a clear vertical split.
Real Estate: Patience and Rental Income
In the real estate sector, Mehta advocates for patience and selectivity, favoring larger developers with established rental income streams. Prestige and DLF are cited as examples of companies that fit this profile. The focus on rental assets reflects a recognition of the current supply of new listings and ongoing valuation adjustments in the market.
A Clear “Avoid” on Tobacco
Mehta maintains a firm “avoid” stance on tobacco stocks, specifically ITC Limited, arguing it should not be categorized as an FMCG stock and its growth visibility is limited. He is instead focusing on small and midcap companies with unique business models and reasonable valuations.
New-Age Digital Firms: Investor Patience Waning
Investor patience with new-age digital firms, such as Eternal, appears to be diminishing as they strive for profitability. Despite this, Mehta maintains a positive long-term view on Eternal, signaling continued conviction in its potential.
Frequently Asked Questions
- What sectors does Dipan Mehta favor? Mehta is currently bullish on NBFCs and pharma.
- What is his view on Reliance Industries? He believes it is transitioning into a holding company.
- Which companies does he recommend in the NBFC space? Bajaj Finance, Chola, and L&T Finance.
- What is his stance on ITC? He advises investors to avoid it.
Pro Tip: Diversification is key. Mehta’s recommendations highlight the importance of spreading investments across different sectors to mitigate risk.
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